Earlier this week the Euro tanked against the US Dollar. As risk sentiment grew in favour of the greenback, the EUR/USD exchange rate tumbled to four-week lows, approaching the 1.1200 psychological level. Experts including analysts from Deutsche Bank have placed the blame for this decline largely on the mighty Greenback. Market participants shifting their focus on this weekend’s expected US-China trade talks have improved the dollar’s appeal.
As the Greenback appreciated, the single currency was put under extreme pressure, forcing it to reach negative territory recently. With the Euro plummeting, this indicates a wider market trend. Investors are piling on, boosting bets on a strong US Dollar as the tit-for-tat trade war drags on. The market’s focus is still very much set on what these discussions can do to improve economic ties between the two countries.
Renewed selling pressure again hit Gold prices. They fell well down toward the bottom of their daily range, approaching $1,300 per troy ounce. The pullback in gold is inextricably tied to the scorching US Dollar, which weighed on demand for the precious metal. Treasury yields have spiked, leading to a violent reaction in gold which has plummeted over $60 in the last week. As a general rule, higher yields disincentivize investment in non-yielding assets and gold is no different.
Market analysts point to factors such as the record high US Dollar and surging Treasury yields. These reasons have significantly curtailed gold demand. As investors start looking for assets that will actually make money, gold’s safe-haven luxuriance fades. The latest moves in international trade negotiations will pummel currency and commodity markets. Look for dramatic changes in these markets in the next few days.
With an OPEC meeting just a few days away and the weekend approaching, traders are understandably on edge. For one, they’re preparing for increased volatility from the US-China trade talks. Stakeholders will want to pay attention to how changes in the value of different currencies affect commodity prices. They want to unpack how these conversations influence the stability of the global economy.